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AMERICAN NATL. v. TRAVELERS INDEM. CO.

July 25, 1995

AMERICAN NATIONAL RED CROSS, Plaintiff,
v.
THE TRAVELERS INDEMNITY COMPANY OF RHODE ISLAND, et al., Defendants, WESTERN EMPLOYERS INSURANCE COMPANY, et al., Third-Party Defendants.



The opinion of the court was delivered by: HARRIS

 Before the Court are three motions for partial summary judgment filed by plaintiff American National Red Cross (ARC); Travelers' oppositions to each of those three motions; and ARC's replies to each. *fn1" ARC has moved for summary judgment on its claim for punitive damages, the fourth claim for relief in ARC's complaint. ARC has also moved for summary judgment on Travelers' six affirmative defenses, based upon Travelers' deposition testimony under Fed. R. Civ. P. 30(b)(6). Finally, ARC has moved for summary judgment on Travelers' affirmative defenses, separate and apart from its motion for summary judgment grounded on the Rule 30(b)(6) testimony. Upon careful consideration of the submissions, the entire record in the case, and the applicable law, plaintiff ARC's motions for summary judgment are denied. Although "findings of fact and conclusions of law are unnecessary on decisions of motions under Rule 12 or 56," Fed. R. Civ. P. 52(a), the Court nonetheless sets forth its analysis, in part because this case survives the rulings herein.

 The facts underlying this action are set out fully in this Court's opinion of March 23, 1993. American Red Cross v. Travelers Indem. Co., 816 F. Supp. 755 (D.D.C. 1993). Briefly stated: Travelers insured ARC for over fifty years. From July 1, 1982, through July 1, 1985, Travelers insured ARC pursuant to three one-year, primary-level comprehensive general liability (CGL) policies. *fn2" Beginning in late 1984, when ARC tendered the first HIV claim under the policies to Travelers, and continuing through September 2, 1991, Travelers paid ARC's defense costs and settlements in connection with HIV claims arising under the policies.

 In August 1990, in response to the tender of another HIV case to Travelers, Travelers informed ARC that it was assuming the defense of the new case subject to a reservation of rights. In August 1991, Travelers informed ARC that effective September 2, 1991, it would no longer defend ARC in cases it had assigned to the 1984-1985 policy; Travelers later followed the same course of action with respect to the 1982-1983 and 1983-1984 policies. Travelers took the position that the HIV claims submitted by ARC fell under either the "completed operations" or "products hazard" provisions of the policies and therefore were subject to an aggregate liability limit of $ 1 million, and that the aggregate liability limit had been exhausted (first with respect to the 1984-1985 policy period, and later with respect to the other two policy periods). In the alternative, Travelers contended that all of the HIV claims combined constituted a single "occurrence," and that all the claims therefore were subject to the $ 1 million "per occurrence" liability limit in the three policies at issue.

 In 1993, this Court issued an opinion in which it held that the "products hazard" and "completed operations" aggregate limits of liability were inapplicable to HIV claims. American Red Cross v. Travelers Indem. Co., 816 F. Supp. 755, 759-60 (D.D.C. 1993). In addition, this Court held that each act of distribution of HIV-contaminated blood constituted a separate "occurrence," and that therefore the $ 1 million "per-occurrence" limit of liability in the policies had not been exhausted. 816 F. Supp. at 761. Travelers therefore was found by this Court to have a continuing duty to defend plaintiff (that duty being retroactive from September 2, 1991), "until [Travelers] can demonstrate that [ARC's] underlying claims fall outside the scope of coverage of the insurance policies." Id. at 762.

 Since this Court's 1993 opinion, the parties have conducted further discovery in this case, and the discovery period is now closed. Plaintiff ARC has filed three motions for partial summary judgment. First, ARC moves for summary judgment on its claim for punitive damages against Travelers. *fn3" Second, ARC moves for summary judgment on Travelers' affirmative defenses, contending that Travelers' Rule 30(b)(6) deponent rendered Travelers' affirmative defenses basically unprovable by asserting the attorney-client privilege and the work-product doctrine in response to questions from ARC about the facts and documents which Travelers contended supported its affirmative defenses. Third, ARC moves for summary judgment as to Travelers' affirmative defenses, on grounds separate and distinct from its motion for partial summary judgment based on Travelers' Rule 30(b)(6) testimony.

 Discussion

 Summary judgment may be granted only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). In considering a summary judgment motion, all evidence and the inferences to be drawn from it must be considered in a light most favorable to the nonmoving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986). Summary judgment cannot be granted "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). The Court finds, after considering the evidence presented in a light most favorable to Travelers, that a genuine issue of material fact exists as to two of ARC's summary judgment motions, and the Court further finds that ARC's third summary judgment motion (based on Travelers' Rule 30(b)(6) deposition testimony) is without merit. Therefore, each of ARC's summary judgment motions is denied. The Court treats each of ARC's three motions in turn.

 ARC's Motion for Partial Summary Judgment on Its Fourth Claim for Relief

 ARC's motion for partial summary judgment on its claim for punitive damages against Travelers may be treated with dispatch. In the first place, Travelers is correct in asserting that ARC's motion for summary judgment on its punitive damages claim is premature. An insured's claim of bad faith breach of contract against its insurer fails if coverage for the underlying claim does not exist. See O'Malley v. United States Fidelity and Guar. Co., 776 F.2d 494, 500-501 (5th Cir. 1985) (holding that, under Mississippi law, an insured bringing a bad faith claim against its insurer must demonstrate "not only that the insurer was liable on the policy, but that the insurer had no 'arguable reasons' for denying coverage") (citations omitted); see also Broadhead v. Hartford Cas. Ins. Co., 773 F. Supp. 882, 904 (D. Miss. 1991) (noting, with regard to an insured's bad faith claim against its insurer, that "punitive damage considerations do . . . typically stem from and implicate coverage questions . . . [and] whether there was bad faith in large part turns on whether the policy provided coverage for those expenses"). As discussed infra, ARC'S motion for summary judgment on Travelers' affirmative defenses fails, since genuine issues of material fact exist as to each of the six affirmative defenses at issue. Therefore, a final determination has not yet been made as to whether coverage exists for the underlying claims in this action. This determination is a necessary first step before any resultant determination may be made as to Travelers' bad faith.

 In addition, and in the alternative, the Court finds that genuine issues of material fact exist as to whether Travelers breached its contractual duty to defend ARC, and whether Travelers breached it in such a manner as to rise to the level of a willful tort. The Court therefore finds that it cannot grant summary judgment for plaintiff on its punitive damages claim. *fn4"

 ARC's Motions for Partial Summary Judgment on Travelers' Affirmative Defenses

 Plaintiff has filed two separate motions for partial summary judgment on Travelers' affirmative defenses. *fn5" First, plaintiff has filed a motion for partial summary judgment on six of Travelers' affirmative defenses, based wholly on the deposition testimony of Timothy Yessman, an attorney in Travelers' Law Department. (This motion is referred to hereinafter as the "Rule 30(b)(6) Summary Judgment Motion.") Second, ARC has filed a substantive motion for partial summary judgment on the same six affirmative defenses (hereinafter referred to as the "Substantive Summary Judgment Motion"). ARC advises the Court in its Substantive Summary Judgment Motion that, should the Court grant summary judgment based on its Rule 30(b)(6) Summary Judgment Motion, the ...


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